United States District Court, S.D. New York
COTY INC., CALVIN KLEIN TRADEMARK TRUST, CALVIN KLEIN, INC., CALVIN KLEIN COSMETIC CORPORATION, HUGO BOSS TRADE MARK MANAGEMENT GMBH & CO. KG, and MARC JACOBS TRADEMARKS, LLC, Plaintiffs,
COSMOPOLITAN COSMETICS INC., EUGENE ABRAHAM, and WILLIAM GOLD, Defendants.
MEMORANDUM OPINION AND ORDER
TAYLOR SWAIN UNITED STATES DISTRICT JUDGE.
Coty Inc., Calvin Klein Trademark Trust, Calvin Klein, Inc.,
Calvin Klein Cosmetic Corporation, HUGO BOSS Trade Mark
Management GmbH & Co. KG, and Marc Jacobs Trademarks, LLC
bring this action against Cosmopolitan Cosmetics Inc., Eugene
Abraham, and William Gold (collectively
“Defendants”). All Plaintiffs other than Coty
Inc. bring claims of trademark infringement and trademark
counterfeiting under Section 32(1) of the Trademark Act of
1946 (the “Lanham Act”), 15 U.S.C. §
1114(1), and, along with Coty Inc., claims of unfair
competition and false designation of origin under Section
43(a) of the Lanham Act, 15 U.S.C. § 1125(a), and unfair
competition under New York common law. Plaintiffs seek
permanent injunctive relief, an accounting, treble profits,
treble damages, compensatory damages, costs and
attorneys' fees, and other relief authorized by the
Lanham Act. Defendants move to dismiss Plaintiffs' First
Amended Complaint (Docket Entry No. 31 (the
“FAC”)) pursuant to Federal Rule of Civil
Procedure 12(b)(6) for failure to state a claim upon which
relief can be granted. (Docket Entry No. 40.)
Court has subject matter jurisdiction of the action under
Section 39 of the Lanham Act, 15 U.S.C. § 1121, and
under 28 U.S.C. §§ 1331, 1338(a), 1338(b), and
1367. The Court has reviewed all of the parties'
submissions and arguments and, for the following reasons,
grants in part and denies in part Defendants' motion.
following facts are taken from the First Amended Complaint,
the well pleaded allegations of which are presumed true for
the purposes of this motion.
Coty Inc. manufactures, distributes, and sells luxury
fragrance products under its own proprietary trademarks and
under licensed marks, including CALVIN KLEIN, HUGO BOSS, and
MARC JACOBS pursuant to exclusive fragrance licenses
(collectively, “Plaintiffs' Fragrances”).
(FAC at ¶ 1.)
affixes a “Production Code” to each unit of
Plaintiffs' Fragrances at the time of manufacture.
(Id. at ¶ 2, 35.) The Production Codes are used
for Plaintiffs' “quality assurance,
anti-counterfeiting and anti-theft measure[s].”
(Id. at ¶¶ 35-37.) The Production Code
indicates the date of production and facilitates
“corrective action or targeted recalls” in the
event of any quality issue. (Id. at ¶ 36.)
Plaintiffs' customers “expect consistent high
quality fragrance products . . . [and] the removal of the
Production Code and resulting mutilation of genuine product
packaging degrades the products” in ways that
“are obviously significant to the consuming
public.” (Id. at ¶¶ 41-42.)
Cosmopolitan Cosmetics (“Cosmopolitan”) is a
corporation that sells fragrances to retailers and other
distributors. (Id. at ¶ 15.) Cosmopolitan has
been selling units of Plaintiffs' Fragrances from which
the Production Codes have been removed, or on which the
Production Codes have been obscured, stickered or otherwise
mutilated (hereinafter, the “Decoded Products”).
(Id. at ¶ 45.) Plaintiffs did not authorize the
sale of the Decoded Products; products are decoded to conceal
the identity of the seller who is diverting the products
outside of authorized distribution channels. (Id. at
¶ 40.) Defendants Eugene Abraham and William Gold are
the CEO and President of Cosmopolitan, respectively, and
Plaintiffs allege that they control the acts of Cosmopolitan
that are described in the complaint and that they are
“directly responsible for or ha[ve] otherwise
orchestrated” the trademark infringement activities.
(Id. at ¶¶ 16, 17.)
survive a motion to dismiss under Rule 12(b)(6), a complaint
must contain “enough facts to state a claim to relief
that is plausible on its face.” Bell Atlantic Corp.
v. Twombly, 550 U.S. 544, 570 (2007). The complaint must
proffer sufficient non-conclusory facts to “plausibly
suggest an entitlement to relief.” Ashcroft v.
Iqbal, 556 U.S. 662, 681 (2009). A complaint that
contains only “naked assertion[s]” will not
suffice. Twombly, 550 U.S. at 557.
for trademark infringement arises when a person uses a
registered mark in commerce in connection with the sale of a
good without the consent of the registrant and in a manner
likely to cause confusion about the source of the goods.
See Warner-Lambert Co. v. Northside Dev. Corp., 86
F.3d 3, 6 (2d Cir. 1996). However, the “First Sale
Doctrine” carves out an exception for the resale of
“genuine goods bearing a true mark even though the sale
is not authorized by the mark owner.” Polymer Tech.
Corp. v. Mimran, 975 F.2d 58, 61 (2d Cir. 1992) (quoting
NEC Electronics v. Cal Circuit Abco, 810 F.2d 1506,
1509 (9th Cir. 1987)).
are two exceptions to the First Sale Doctrine that are
relevant to Plaintiffs' claims: the Quality Control
Exception and the Material Difference Exception. The Quality
Control Exception applies when goods do not conform to the
trademark holder's quality control standards. See
Polymer Tech. Corp. v. Mimran, 37 F.3d 74, 78 (2d Cir.
1994). The Material Difference Exception applies if the goods
differ in a way that would likely be relevant to a
consumer's decision to purchase them. See Davidoff
& Cie, S.A. v. PLD Int'l Corp., 263 F.3d 1297,
1302 (11th Cir. 2001).
invoke the Quality Control Exception. As the Second Circuit
has observed, “[o]ne of the most valuable and important
protections afforded by the Lanham Act is the right to
control the quality of the goods manufactured and sold under
the holder's trademark.” El Greco Leather
Prods. Co. v. Shoe World, Inc., 806 F.2d 392, 395 (2d
Cir. 1986). “[T]he actual quality of the goods is
irrelevant; it is the control of quality that a trademark
holder is entitled to maintain.” Id. Moreover,
“a trademark holder is not required to adopt the most
stringent quality control procedures available, ” but
is instead permitted to make a business judgment about the
type of procedures to implement. Warner-Lambert, 86
F.3d at 6-7. Applying these considerations, the Second
Circuit has held that, to establish that a product is not
genuine because it does not meet the trademark holder's
quality control standards, a “trademark holder must
demonstrate only that: (i) it has established legitimate,
substantial, and nonpretextual quality control procedures,
(ii) it abides by these procedures, and (iii) the
non-conforming sales will diminish the value of the
mark.” Id. at 6.
argue that the Quality Control Exception is unavailable
because Plaintiffs have pleaded that the Production Code
measure was implemented by Coty, a licensee, rather than by
the trademark owner, and because Plaintiffs do not apply
Production Codes to every unit of each of their fragrances.
Defendants' arguments are unavailing at this preliminary
stage of the proceeding. In analyzing claims asserted under
the Quality Control Exception, courts in the Second Circuit
have considered whether goods conform with the quality
control procedures implemented by a licensee as well as
measures implemented by the trademark holder itself. See,
e.g., Zino Davidoff SA v. CVS Corp., 571 F.3d
238 (2d Cir. 2009) (finding that goods were not genuine where
they failed to meet quality control measures developed
jointly by the trademark holder and licensee);
L'Oreal USA, Inc. v. Trend Beauty Corp., No.
11-CIV-4187 (RA), 2013 WL 4400532, at *15 (S.D.N.Y. Aug. 15,
2013) (finding that goods were not genuine where they lacked
markings used by the exclusive licensee to maintain quality
control); Zip Int'l Grp., LLC v. Trilini Imps.,
Inc., No. 09-CIV-2437 (JG) (VVP), 2011 WL 2132980, at *4
(E.D.N.Y. May 24, 2011) (stating that the quality control
exception requires that Plaintiff produce “evidence to
demonstrate that [Defendant's] goods are not subject to
the same type or measure of quality control ...